Sometimes, one has to wonder at the audacity of an entity. Banks, financial lenders and credit card issuers have been moving more and more towards limiting the rights of consumers to sue in court for problems with their accounts. While fees and other “service charges” have become a significant generator of revenue for the financial services industry, the industry has been foreclosing the option for consumers bring litigation, especially class-action suits.
Instead, they have shifted the litigation to arbitration, which for most consumers means effectively ending any right to redress for wrongs they suffer. A report from the Consumer Financial Protection Bureau (CFPB) finds that these clauses are restricting consumer’s relief by preventing the use of class-action lawsuits.
The CFPB noted that from 2010 to 2012, there was an average of 615 arbitration hearings filed by consumers. They found 32 million consumers were eligible for relief in class-action cases.
Yet, the industry spokesperson had the audacity to claim that arbitration is “efficient” and “low-cost,” which begs the question, “to whom?” If you were subjected to improper fees, unless the amounted to thousands of dollars in a year, it is unlikely you would ever file any individual action.
If there is $200 at stake, and an arbitration proceeding will cost you $1,000, you are not likely to spend $800 to “prove” something to a billion dollar corporation.
The CFPB may now issue regulations that would prohibit or restrict the policy of forcing consumers to waive their rights to class-action lawsuits over fees. It is likely the financial industry will oppose this move. It seems equally unlikely that many consumers will.
Wsj.com, “Arbitration Clauses for Cards, Checking Draw Criticism,” Alan Zibel, March 10, 2015